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Smurfit Kappa insiders buy on weakness

The packaging heavyweight has lost a quarter of its market value since February, but are underlying market trends moving its way?
Smurfit Kappa insiders buy on weakness

Prospects for the packaging and paper segment should benefit from an increase in online retail sales during the lockdown. That needs to be set against the virtual shutdown of the high street, both here and abroad, which will stall demand for disposable instore packaging until normal commercial activity resumes.

IC TIP: Hold at 2338p

For investors, it is reassuring that many products from the sector are routinely destined for less discretionary end markets, such as food and pharmaceuticals, and there has been a demonstrable shift in consumer habits towards delivery or food takeaway services. Meanwhile, supermarkets have struggled to re-stock produce as households tuck away storable foodstuffs, creating further demand for the packagers.

It remains to be seen whether the lockdown will accelerate the shift to online channels, although that seems highly likely. But even if it does not trigger a long-term change in consumer habits, conventional retailers may now look to reduce leasehold arrangements in favour of e-commerce.

Against this mixed backdrop, Smurfit Kappa (SKG) delivered sales volume growth in Europe and the Americas during the first three months of the year, although cash profits at €380m (£334m) were down by 10 per cent year on year. The underlying margin pulled back by a full percentage point, but both these metrics were set against strong comparators in the first quarter of 2019.

The packager joined several other FTSE 100 constituents by pulling its full-year dividend. The emphasis is on capital preservation, so capital expenditure has been trimmed from previous guidance of €615m, to be in the range of €500-€550m. It remains a cash-generative operation, boasting liquidity of over €1.5 billion, average debt maturities of over five years, and no bond maturity until 2024.

Buys      
CompanyDirector/PDMRDateNo. of sharesPrice (p)Aggregate value (£)Comments
Capital & Counties PropertiesSitul Jobanputra (cfo)17 Apr 2012,5008811,000 
Capital & Counties PropertiesMichelle McGrath17 Apr 2020,0008817,600 
FergusonThomas Schmitt15 Apr 2013,5005,14769,497ADSs, converted from $
FergusonGeoff Drabble (ch)16 Apr 204,9835,004249,349 
Go-AheadElodie Brian (cfo)21 Apr 202,5001,205.4230,135 
IntercedeKlaas van der Leest (ce)17 Apr 2035,00053.7518,813Residual holding 53,904 shares
MedicaStephen Davies15 Apr 2051,28211760,000 
RentokilJulie Southern16 Apr 204,891406.8219,898 
Robert WaltersRobert Walters (ce)21 Apr 2025,68538999,915Residual holding 2,639,356 shares
Smurfit KappaAnne Anderson16 Apr 203,6682,24982,493Converted from €
Smurfit KappaFrits Beurskens17 Apr 202,8002,32765,156Converted from €
SRT Marine SystemsSimon Tucker (ce)14 Apr 20400,00025100,000Placing participation
Sells      
CompanyDirector/PDMRDateNo. of sharesPrice (p)Aggregate value (£)Comments
GenusDaniel Hartley (co sec)17 Apr 207503,61027,075